Rexford Industrial Realty, Inc.

Thank you for standing by. My name is Marvilou and I will be your conference operator today. At this time, I would like to welcome everyone to the Rexford Industrial Realty Inc. First Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to David Blanzard, General Counsel. You may begin.

We thank you for joining Rexford Investor's first quarter 2024 earnings conference call. In addition to the press release distributed yesterday after market close, we posted a supplemental package and investor presentation in the investor relations section on our website at rexfordinvestor.com. On today's call, management's remarks and answers to your questions may contain forward-looking statements as defined by federal securities laws. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ. For more information about these risk factors, please review our 10-K and other SEC filings. Brexford Industrial assumes no obligation to update any forward-looking statements in the future. Certain financial information presented on this call represents non-GAAP financial measures. Our earnings release and supplemental package present GAAP reconciliations and an explanation of why such non-GAAP financial measures are useful to investors. Today's conference call is hosted by Rexford Industrial's Co-Chief Executive Officers, Michael Frankel and Howard Schlemmer, together with Chief Financial Officer, Laura Clark. They will make some prepared remarks, and then we will open the call for your questions. Now I will turn the call over to Michael.

Thank you, David, and welcome everyone to Rexford Industrials' first quarter earnings call. I'll begin with a few remarks, followed by Howard, who will provide market and operational detail. Then Laura will provide our financial results and outlook. I'd like to begin by thanking our Rexford team for your strong results and another quarter marked by substantial value creation across the Rexford platform. On the leasing front, the team completed 3.2 million square feet of leasing activity at very favorable spreads as we continue to monetize the substantial mark-to-market for lease rates within our in-place portfolio. And notably, we extended our largest tenant, which Howard will detail shortly. On the investment front, our team completed over $1 billion of acquisitions, delivering substantial initial and longer-term accretion. Our activity included a large off-market portfolio purchase acquired from a combination of Blackstone-affiliated entities for approximately $1 billion, comprising over 3 million square feet of high-quality warehouse product focused within Premier, Los Angeles, and Orange County submarkets, with tenant sizes averaging 43,000 square feet. The transaction is notable for the high quality of assets and significant levels of cash flow accretion contributed to our portfolio. In 2024 alone, the portfolio is expected to contribute an incremental $0.04 of FFO per share net of funding costs, along with an estimated 25 to 50 basis point increase in operating margin. Additional growth over time will be driven by some value-add improvements, as well as the 3.9% embedded average annual rent increases within the portfolio. The investment was also unique, as it was the result of an off-market collaboration between the Rexford and Blackstone teams. We worked together to curate the portfolio by selecting assets to optimize the blend of quality, return on investment, and accretion to our business. The transaction is a testament to the benefits associated with working principle to principle to drive a superior outcome for both parties. The transaction is also indicative of a range of portfolios that we continue to track. which may be catalyzed from time to time by potential seller or market circumstances. With regard to market conditions, we are seeing some current choppiness, particularly within certain submarkets and size ranges. We expect some ongoing relative volatility within our markets through the near term, principally driven by heightened uncertainty in the interest rate environment exacerbated by the current global geopolitical unrest. However, despite some relative market uncertainty, we believe our infill Southern California industrial tenant base will continue to prove itself by demonstrating the nation's strongest tenant and supply demand fundamentals over time. Although we can't predict how our market may perform into future periods, so far we are seeing a distinct and accelerating differentiation between the stronger relative performance of our infill SoCal portfolio, whether measured by net absorption, change in rents, or related metrics, as compared to the relative performance of larger products sized over 200,000 square feet, primarily located in non-infill big box markets, such as the Inland Empire. Big box larger space is typically part of a super regional or global logistics network, where space needs are relatively fungible across locations, and where demand for any single space can be highly elastic and reactive to short-term demand drivers. In contrast, our smaller infill tenants are generally serving the nation's largest first and last mile of distribution, focused on regional consumption within the nation's largest and most diverse regional economy, where performance through cycles has tended to be more durable. Big box markets, such as the Inland Empire, are also subject to volatility driven by substantial increases in new supply, impacting occupancy through cycles. as compared to our high-barrier infill market, which is subject to an ongoing scarcity of supply with a virtually incurable supply-demand imbalance over the long term. Consequently, and as we've observed through prior cycles, our Rexford tenant base, which averages 26,000 square feet in size and is 100% located within prime high-barrier infill SoCal markets, is outperforming the big-box markets and product types. Looking forward, the growth opportunity embedded within our existing portfolio continues to be substantial. Over just the next three years, we expect cash NOI to increase by $282 million, or 47%, growing to $876 million in total NOI. Importantly, this assumes today's rents and no future acquisitions and is comprised of $94 million of incremental NOI related to repositioning and redevelopment, stabilizing over the next three years, $88 million from the conversion of below-market leases to market rents, assuming today's rents and no future market rent growth, $58 million related to acquisitions closed year-to-date, and $42 million from the 3.6% embedded contractual rent steps within our current portfolio. We continue to be positioned to execute upon our expected 11% to 13% three-year average annual core FFO per share growth through 2026, which assumes no future acquisitions. Please note that we plan to update our long-term core FFO for share growth forecast on an annual basis at the beginning of the year. With that, I'd like to thank the Rexford team once again for your tremendous dedication and results, and I'm pleased to turn the call over to Howard.